BILL ANALYSIS
SENATE COMMITTEE ON EDUCATION
Gloria Romero, Chair
2009-2010 Regular Session
BILL NO: AB 2082
AUTHOR: Committee on Education
AMENDED: May 28, 2010
FISCAL COMM: Yes HEARING DATE: June 30, 2010
URGENCY: No CONSULTANT:Daniel Alvarez
SUBJECT : Local educational agencies: reimbursable state
mandates.
KEY POLICY ISSUE
Should the state shift responsibility for resolving incorrect
mandate reduction claims (IRCs) from the Commission on State
Mandates (CSM) to the Education Audit Appeals Panel (EAAP)?
Should the state impose automatic time limits to any statute,
keyed as a mandate on local education agencies, would this
unduly limit Legislative prerogative?
SUMMARY
This bill implements three changes related to the state's
reimbursement process for educational mandates by (1)
shifting the process for hearing incorrect reduction claims
(IRCs), as specified, (2) providing for future legislative
review of new mandates, and (3) clarifying the information on
educational mandates that the Legislative Analyst Office
(LAO) is required to provide the Legislature.
BACKGROUND
The California Constitution requires the state to provide a
subvention of funds to reimburse local governments, including
local educational entities (LEAs), whenever the Legislature
or a state agency mandates a new program or higher level of
service, with specified exceptions. (Section 6 of Article
XIII B of the California Constitution)
Existing law:
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1) Establishes a procedure for local government agencies to
file test claims and claims for reimbursement of these
costs with the CSM and the Controller. (Government Code
17500 et. seq.)
2) Requires the CSM to establish procedures for dealing
with incorrect reduction claims. (GC 17553)
3) The State Controller may reduce the amount of any
reimbursement claim that it determines to be excessive
or unreasonable. (GC 17561)
4) If the State Controller takes such an action and the
claimant disputes it, the claimant may file an incorrect
reduction claim with the CSM. An incorrect reduction
claim alleges that the Controller incorrectly reduced
the amount paid on a reimbursement claim for a
state-mandated program. The CSM hears and decides
whether the State's Controller reduction was correct.
(GC 17551)
5) Requires the LAO to submit a report to the Joint
Legislative Budget Committee and legislative fiscal
committees on the mandates reported by the CSM, and
requires that report to make recommendations as to
whether the mandate should be repealed, funded,
suspended, or modified. (GC 17562)
6) Establishes the Education Audit Appeals Panel (EAAP) in
order to allow local education agencies to appeal
specified audit findings to a quasi-judicial panel; also
establishes a process and deadlines that govern EAAP's
actions and provide due process to appellants, and
requires the membership of EAAP to consist of the State
Superintendent of Public Instruction, the Director of
the Department of Finance, and the Executive Director of
the Fiscal Crisis Management Assistance Team. (EC
41344.1 et. seq.)
ANALYSIS
This bill :
1) Requires the Commission on State Mandates (CSM) to
transfer all pending IRCs filed by local educational
agencies (LEAs), excluding community college districts,
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to the Education Audits Appeal Panel (EAAP) by July 1,
2011. In addition, this measure:
a) Deems the transferred IRCs to have been
appealed to the EAAP, and requires the EAAP to hold
a hearing on or before the following dates:
i) June 30, 2012 for IRCs filed prior
to January 1, 2005;
ii) June 30, 2013 for IRCs filed on or
after January 1, 2005 and prior to January 1,
2007;
iii) June 30, 2014 for IRCs filed on or
after January 1, 2007 and prior to January 1,
2008; or
iv) June 30, 2015 for IRCs filed on or
after January 1, 2008 and prior to July 1,
2011.
b) Requires any IRC filed by an LEA, excluding
community college districts, commencing with the
2011-12 fiscal year, to be filed as an appeal with
the EAAP within 60 days of notification by the
State Controller (SCO) that the claim has been
reduced.
c) Requires the EAAP to hold a hearing within 90
days of the receipt of the IRC filed as an appeal,
and to adjudicate that appeal in a manner similar
to the panel's treatment of other education audit
appeals.
d) Authorizes both LEAs filing IRCs as appeals
and the EAAP to consolidate similar claims made by
multiple K-12 LEAs into a single consolidated
claim, as specified.
e) Prohibits, beginning with the 2011-12 fiscal
year, the CSM from ordering a reconsideration of
all or part of any IRC that is eligible to be filed
as an appeal with the Education Audits Appeal
Panel.
1) States legislative intent that statutes creating a
reimbursable state mandate on LEAs be periodically
reviewed, and that the Legislature consider
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recommendations on whether those statutes should be
amended, repealed, or remain unchanged.
2) Requires that the LAO review and report to the policy
and fiscal committees in both legislative houses on each
reimbursable state mandate relating to K-12 LEAs; also
specifies the information to be provided in the report,
including a summary of the mandate, its statutory
source, related fiscal information, and recommendations
as to whether the mandate should be amended, repealed,
or remain unchanged.
3) Requires the Legislative Counsel, in drafting a bill or
amendment that imposes a state mandated local program on
a K-12 LEA, to include a provision that repeals the
state mandated local program on a local educational
agency, or makes the requirement inoperative, five years
after the date on which the requirement becomes
operative, unless the person requesting the bill or
amendment directs the Legislative Counsel to do
otherwise.
STAFF COMMENTS
1) Need for the bill . According to the author, this bill
proposes to address recommendations made in the State
Auditor's October 2009 report entitled, State Mandates:
Operational and Structural Changes Have Yielded Limited
Improvements in Expediting Processes and in Controlling
Costs and Liabilities. This measure would address three
issues (a) addressing the backlog of pending incorrect
reduction claims; (b) providing information to the
Legislature in order for it to make informed decisions
regarding the consequences of establishing a state
reimbursable mandate; and (c) establishing sunsets for
each new mandate in order to assess the impact of the
mandate.
2) Background on mandates . In 1979, Proposition 4 amended
the California Constitution by adding Article XIII B,
Section 6 requiring the state to reimburse local
governments for the cost of new programs or higher
levels of service mandated by the Legislature or any
state agency. In 1984, the Legislature created the
Commission on State Mandates (CSM), as a quasi-judicial
body, to decide test claims alleging that the State
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imposed a reimbursable state-mandated local program. If
the CSM identifies a state-mandated program as eligible
for reimbursement, it adopts parameters and guidelines
defining what activities will be reimbursed and adopts
statewide cost estimates. The CSM is also authorized to
hear incorrect reductions claims (IRCs) from local
agencies if the Controller reduces reimbursement claims
upon audit and the claimant chooses to dispute that
reduction.
The CSM consists of the State Treasurer, the State
Controller, the Director of DOF, the Director of the
Office of Planning and Research, two local elected
officials (with the restriction that they come from
different categories of local government, including
school district governing boards, city councils, or
county boards of supervisors), and a public member with
experience in public finance. No current member of the
CSM is an elected member of a LEA board.
3) State Audit Report . In October 2009, the California
State Auditor issued a report concerning state mandate
determination and payment processes. According to this
audit report, "while the Commission on State Mandates
has made progress in reducing its backlog of test claims
for state mandates, the continuing backlog is large."
The auditor finds that high workload and insufficient
resources exist at the CSM, and goes on to say that,
"This situation, combined with the long time that
elapses before the Commission makes determinations,
means that substantial costs will continue to build
before the Legislature has the information it needs to
take any necessary action." Three findings or
recommendations of the State Auditor form the basis for
the proposals in this bill.
A backlog of pending IRCs. CSM currently
reports 158 pending IRCs, with 40 of those claims
filed by K-12 LEAs; these pending K-12 claims
amount to over $15 million. The State Auditor
feels that this backlog undermines accountability
in the mandate process, leads to an understatement
of the State's liability, "keeps the Legislature
from being able to assess the true cost of
mandates," and potentially keeps funds out of the
hands of LEAs.
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The State Auditor recommended that the CSM work
with the Department of Finance to seek additional
resources to reduce its backlog of IRCs and test
claims.
Problems can arise when new required
activities for local entities are established
"?without effective evaluation of the potential
breadth or cost of the activities."
The State Auditor notes that increasing information
available to the Legislature on the impacts of
educational mandates appears to be called for.
Problems can arise due to the lack of state
control of mandate activities undertaken by local
entities and the tendency for programs to diverge
from original intentions or lose their usefulness
over time."
The State Auditor suggests the sunsetting of each
mandate, so as to enable a legislative
"reassessment of mandate activities and costs" at a
later time.
1) Concerns with shifting IRC responsibilites . Both the
CSM and State Controller point out the provisions of
this measure that shift IRC responsibilities from the
CSM to the EAAP may result in conflicting decisions,
inconsistencies and confusion. For example, at present,
several state mandated programs apply equally to all
local agencies, school districts, and community college
districts and those entities have pending IRCs on the
same program. Under this measure, the EAAP would make
determinations for the K-12 LEAs, while the CSM would
for the remaining entities - any final determinations
may be in conflict. In addition, both entities point
out the possibility of increased litigation and the
possible creation of a mandate by changing the process
itself.
Furthermore, it should be noted that the EAAP may have
similar staffing issues related to the redirected
workload associated with hearing IRCs filed by K-12 LEAs
as exists with the CSM.
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Staff recommends amendments that (1) delete the
provisions related to shifting IRC resolution
responsibilities from the CSM to EAAP; and (2) add
language requiring the CSM to annually report to the
Assembly and Senate Committees on Education and the
fiscal committees of the Legislature on (a) how many
IRCs exist, including brief narrative; (b) the status of
the IRC; (c) how many and which IRCs have been resolved;
and (d) a proposed schedule for addressing IRCs.
2) Automatic Repeal or Inoperability of Education Bills
Keyed with a Mandate . This measure makes any bill
introduced or amended that imposes a state-mandated
local program on an LEA, as determined by Legislative
Counsel, to include an automatic repeal or makes the
requirement inoperative no later than five years
following the date from which the requirement becomes
operative, unless Legislative Counsel is instructed
otherwise when drafting the measure. The State Auditor,
after discussion with other states, points out that some
mandates represent permanent solutions to temporary
problems. The Auditor suggested the sunset of each
mandate, to enable a legislative "reassessment of
mandate activities and costs" at a later time.
Though an automatic repeal or sunset would provide an
opportunity for review of education mandates; arguably,
the additional reporting by the Legislative Analyst, as
envisioned in this measure, should promote the regular
"evaluation" of each mandate. In addition, one
Legislature cannot bind a future Legislature. If this
provision is "notwithstood" or not included (per an
author's instructions) on a regular basis would the
state end up with a better review process? Finally,
does this approach limit Legislative prerogative by
pre-supposing an automatic repeal / sunset time limit of
five years?
Staff recommends an amendment striking this provision
from the measure.
3) The Legislative Analyst's Office (LAO) recommendations
to revise the K-12 state reimbursable mandate process .
According to the LAO, the mandates process has
significant, longstanding shortcomings. Test claims can
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take many years to be resolved. During this time, state
fiscal liabilities increase and K-14 education agencies
are not reimbursed for mandated activities. In addition,
the LAO identifies the following major problems with the
current K-14 mandate system: (a) mandates do not serve a
compelling purpose; (b) costs can be higher than
anticipated; (d) reimbursements can vary greatly without
justification; (e) reimbursements reward inefficiency;
and (f) the reimbursement process ignores effectiveness.
The LAO recommends a comprehensive reform package for
K-14 education mandates that relies on making
determinations for individual mandates. These
recommendations include: (a) either funding or
eliminating them in their entirety and (b) a hybrid
approach whereby certain activities associated with a
mandate would be funded and the remaining activities
eliminated.
4) Policy arguments .
Proponents argue that the current mandate
reimbursement process is broken, and that AB 2082
would provide for more timely, transparent and
well-informed state decisions on audits of mandated
reimbursement claims.
Opponents contend as cited above in staff
comments #4 that shifting IRC resolution
responsibilities from the CSM to the EAAP may
result in conflicting decisions, inconsistencies
and confusion - particularly with mandates IRCs
that cross various governmental and education
entities.
SUPPORT
School Innovations and Advocacy
Small School District Association
OPPOSITION
Commission on State Mandates
State Controller
Education Mandated Cost Network
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